Looking Beyond the National Level: Foreign Direct Investment Attraction in U.S. States

Abstract

International relations scholars need to look beyond the national level because U.S. states and governors are increasingly important actors in world politics. One way to look at their international activities is by examining the ways in which U.S. states seek to attract foreign direct investment (FDI), just one research puzzle at the nexus of international relations and U.S. state politics, two fields that rarely talk to one another. After pointing out the gaps within theories from international relations and international political economy, this paper describes the evolving global roles of both U.S. states and governors and shows how U.S. states attract FDI through the use of their international offices and governor-led overseas missions. Empirical findings indicate that U.S. states' international offices and a higher level of economic interdependence help states attract FDI, and the paper argues that extension of institutional approaches from IPE may be valuable for future research about the international capabilities of subnational governments and their leaders.

International Capital and Subnational Politics: Partisanship and Foreign Direct Investment in Mexican States

“…Similarly, the surrounding states’ market potential is found to deter (Blonigen et al 2007; Halvorsen and Jakobsen 2013) and attract (Bobonis and Shatz 2007) FDI. Education has positive (Blonigen et al 2007), negative, or insignificant (McMillan 2013) effect on investment. Unemployment is also associated with more (Kandogan 2012), less (McMillan 2013), and non-significant changes (Halvorsen and Jakobsen 2013) in FDI.…”

Does the party in power affect FDI? First causal evidence from narrow margin US state elections

“…To better isolate the impact of the gubernatorial election, we include more factors that may play roles in shaping foreign economic policies. In addition to state governor, state legislatures are also regarded powerful on international issues (McMillan, 2009). In Table 6 we include the variables indicating which party controls the house and which controls the senate.…”

“…As regards FDI in particular, states take the lead role in recruitment of inward investment, with the role of the federal government much smaller. Many state-operated international offices and governor-led overseas missions are set up to attract FDI (McMillan, 2009). US state officials claim that the international trade and investment is the largest category of state international engagement (Whatley, 2003).…”

“…That effect is not statistically significant, however, leading them to conclude that "... foreign direct investors seem relatively agnostic with respect to the question of which party controls the state government" (page 182). McMillan (2009) finds a significant and positive relationship between Democratic governorship and FDI. Using a slightly different measure Fox (1996) also finds a positive and significant association between Democratic governorship and the foreign firm location decisions.…”

Explaining paradiplomacy: do local pro-international structures and political support matter?

“…Among the drivers to explain local engagement in international relations, those receiving attention are economic, cooperative, and political considerations (Cornago, 2000;Kuznetsov, 2014;Lecours, 2008). While some authors have focused on the motivations and consequences of joining paradiplomatic activities (Grydehøj, 2014;Joenniemi & Sergunin, 2014;McMillan, 2009;Milani & Ribeiro, 2011;Nganje, 2014;Paquin, 2021;Rodrigues & Mattioli, 2017), few have systematically explored the barriers and advocates of subnational governmental diplomacy (for exceptions, see Mukti, 2019;Njaramba, 2019;Surwandono, 2018). Further, existing studies mainly rely on single case studies and historical/descriptive accounts (Chambers, 2012;Harakan et al, 2021;Paquin, 2021;Zamorano & Rodríguez Morató, 2015).…”